The official blog of Illinois Issues magazine,
published by the Center for State Policy and Leadership
at the University of Illinois Springfield

Friday, July 13, 2012

Future of coal-to-gas plant rests with Quinn

By Jamey Dunn

A year ago today, Gov. Pat Quinn signed legislation meant to clear the way for construction of a plant on the southeast side of Chicago that would convert coal to natural gas. Now, the governor’s pen may yet again decide the future of the controversial project.

Under the original plan, four utility companies would have covered construction costs and purchased gas from the plant, which would be owned by Leucadia National Corp.
But Peoples Gas and North Shore Gas backed out of the project, leaving only Ameren and Nicor. The Illinois Commerce Commission (ICC) ruled this week that the two remaining companies would not be required to pay for all the costs but only cover a percentage equal to the amount of gas they are each required to buy. “The commission determined that in accordance with the law, Nicor and Ameren Illinois would each be responsible for 42 percent of the capital costs and operational expenses, for a total of 84 percent of the total, since they are required to take 84 percent of the substitute natural gas plant’s output,” said a written statement from the ICC.

Construction is scheduled to start in 2015, and the plant would be built on the polluted site of the former LTV Steel plant. It is designed to trap most of its emissions underground instead of releasing them into the air.

But according to Chicago Clean Energy, a subsidiary of Leucadia, the project is now in jeopardy. The group says the plant cannot be financed unless there is guarantee that all the construction costs are covered. Supporters of the project are calling on Gov. Pat Quinn to sign Senate Bill 3766, which would override the ICC’s ruling and require the two utilities to pay all the construction cost.

“The Chicago Clean Energy project is the most significant economic investment that the southeast side has ever seen,” Ted Stalnos, president of the Calumet Area Industrial Commission, said during a recent rally in favor of the project. “Let’s clean up that site. Sign this bill. Let’s put people back to work.” Chicago Clean Energy plans to clean up the site before building the plant there.
“The southeast side of Chicago is currently a jobs desert, an opportunity desert. We need this investment,” said Dan McMahon, business representative for Carpenters Union Local 272. The plant is expected to create an estimated 1,000 construction jobs and 200 permanent jobs after it is built.

But others representing industry throughout the state say the plant would be bad for business because it would increase rates far beyond the current cost of natural gas. “It’s not fair for rate payers in the Ameren and Nicor territories to subside 100 percent of the cost,” said Mark Denzler, vice president and chief operating officer of the Illinois Manufacturing Association. “Gov. Quinn, who is the founder of [the Citizens Utility Board (CUB)], now solely has the power of whether to sign one of the biggest rate increases in history or not.” Jim Chilsen director of communications for CUB, a Chicago-based consumer advocacy group, agrees. “We’re not universally opposed to projects like these, but we are concerned that the way that the legislation is structured that it is extremely unfair to suburban, central and southern Illinois consumers who could be forced to pay up to triple costs.”

He says the fact that Quinn founded CUB does not necessarily give the group a leg up when it comes to persuading Quinn to veto the bill. “The governor, he has a long history of consumer advocacy. He listens to all sides of an issue. I don’t think that we necessarily have an advantage.”
However, he said that the governor should take notice that business groups, environmental groups and consumer advocacy groups, which are not often unified on an issue, have teamed up to ask Quinn to reject the plan. “I think that’s a pretty powerful message. I think that the facts speak for themselves.”

A spokeswoman for Quinn said the governor is reviewing the bill.

Proponents say there are no guarantees that natural gas prices will stay low. They argue that having a consistent source of natural gas in the state for the next 30 years would help protect customers from volatility. “Prices fluctuate -- gas station prices, and so do natural gas prices, as well,” said Chicago Democratic Sen. Donne Trotter, who sponsored the legislation enabling the project. Trotter argues that the plant would bring desperately needed jobs to the area.

Environmental groups say that the southeast side, which has a history of dangerous pollution, should not have to take an environmental risk to have economic development. (For more on the environmental history of the area, see the current Illinois Issues.) “They are looking for jobs,” said Becki Clayborn, a representative of the Illinois chapter of the Sierra Club’s Illinois Beyond Coal Campaign. “But because the community has seen it time and time again, they are not buying it.”
Local environmental groups hope that the area can bolster its economy through renewable energy projects and by becoming a recreation destination.

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The bureau follows state government from the Capitol Press Room and writes articles for Illinois Issues magazine, published by the Center for State Policy and Leadership at the University of Illinois at Springfield.
Contact: illinois.issues@gmail.com